Following up on our previous article, "To Tariff, or Not to Tariff", the President issued a new Executive Order on April 15 requesting the Secretary of Commerce commence an investigation into the national security risks from US reliance on processed critical minerals and other derivative products imported from other nations.
The President believes national security and economic resilience is threatened by dependence on foreign processed critical materials, especially rare earth materials which are difficult to obtain domestically. As a result of our dependence on foreign materials, he believes foreign producers are manipulating prices to the detriment of the US. Additionally, China, in particular, banned the exports of gallium, germanium, antimony and other key high-tech materials which are key to such industries as aerospace, auto and semiconductors.
In response to these issues, the President ordered an increase in tariffs on Chinese imports. These tariffs include:
- a 125% reciprocal tariff,
- a 20% tariff to address the fentanyl crisis,
- Section 301 tariffs on specific goods, between 7.5% and 100%, and
- Closing loopholes and exemptions for steel and aluminum to impose a “true” 25% tariff on those items
However, confusion exists due to the President’s statement that tariffs on Chinese imports were now 245%. Since the newly issued tariffs in the Executive Order are intended to compound with prior tariff amounts from previous administrations, the aggregate tariffs on some Chinese products may, in fact, reach up to 245%. For example, electric vehicles and syringes were subject to 100% Section 301 tariffs during the Biden administration and aggregated with the 125% reciprocal tariffs and 20% fentanyl tariffs. The total tariffs are now 245%. The 245% is the cumulative total tariff on some, but not all Chinese goods. China responded by escalating its own tariffs on US goods to 125% and restricting or banning the export of critical products. It is likely China will continue to do so in response to further US escalation.
The goal is to eventually negotiate mutually acceptable trade agreements not only with China but other countries. According to the President’s economic advisers, the US is currently in trade talks with at least 10 countries and close to reaching trade agreements. We will continue to update on the trade negotiations and Commerce’s investigation.
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